[Editor's note: This post was updated, and a correction appended below, on April 21.]
A deadline is looming for a popular Social Security claiming strategy. After April 29, the option to file-and-suspend your retirement benefit—a popular option for married couples—will end for most pre-retirees.
The file-and-suspend strategy allowed one spouse to take a full spousal benefit for up to four years, while both spouses deferred their own retirement benefits as late as age 70. The strategy was popularized in a book I co-authored, “Get What’s Yours: The Secrets to Maxing Out Your Social Security.” I guess the book did its job too well—we’ve been told that it led to a surge in file-and-suspend filings, which prompted the rule changes. I'll have a bit more to say about this in a moment.
First, since time is short, I'll walk you through the new rules and how to take advantage of this benefit while you can.
Briefly, after April 29, you will no longer have the option to file and suspend unless you have reached full retirement age (FRA) by that date—FRA is now 66. If you meet that requirement and have filed and suspended on or before April 29, your spouse can claim a spousal benefit on your earnings record after the new law takes effect. And if you decide to resume payments before reaching age 70, you will retain the option to receive all of your suspended benefits in a single, lump-sum payments. (The right to these lump-sum payments will also go away under the new law.)
For those who are at least 62 by January 2 of this year, you are grandfathered into another option. You can file what’s called a restricted application to take only a spousal benefit (or, if you qualify, an ex-spousal benefit), while deferring the filing of your own retirement benefit until as late as age 70. (You can only file a restricted application when you've reached FRA.) By deferring your own retirement claim, your benefit will increase at a rate of 8% a year until age 70, thanks to Social Security’s delayed retirement credits.
If you want to get your file-and suspend application in under the wire, move quickly. Make an appointment with your local Social Security office, if you can. You can also file online at ssa.gov.
To be clear, you can still suspend your benefit under the new laws, but there may be little advantage in doing so. Say you filed early at age 64 because you lost your job; then at age 66, you found employment and no longer need the benefit. Under the old rules, you could suspend Social Security and earn delayed retirement credits. (You can only receive these credits if you suspend after you reach FRA.)
With these changes, it will no longer be possible for anyone who was younger than 62 as of last January 2 to file for a spousal benefit while allowing his or her own retirement benefit to grow. And if you're under age 66 now and suspend your claim—at any time in the future—you cannot receive a benefit based on anyone else's earnings' record, and no one (including school-age children) can claim a benefit based on your record. This change essentially wipes out a major strategy for two-income couples, who previously opted to suspend the primary earner's retirement benefits, while he or she claimed a spousal benefit.
The new rules also complicate (or fail to fix) long-standing claiming provisions that often trip people up. Here are three tricky rules to keep in mind:
* Deeming. If you file for a spousal or retirement benefit, you are automatically deemed to be filing simultaneously for any other benefits to which you are entitled. Deeming used to apply only to claims before FRA, but under the new law, it will apply to claims at even older ages. (There is an exception for survivor benefits, which I’ll get to in a moment.) Social Security does not pay the combined value of these benefits but rather an amount that is roughly equal to the greater of the two.
*Spousal benefits. A husband or wife can claim a spousal benefit based on the earnings of the partner, but only if the first spouse has already filed for his or her retirement benefit. (Spousal benefits are also available to divorced spouses with certain restrictions.) Under the old rules, one spouse could file and suspend at FRA, and the second spouse could then file a restricted application at his or her FRA for just a spousal benefit. Under the new law, only people who are grandfathered can do so.
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*Survivor benefits. These benefits can be claimed as early as age 60. But the benefit is reduced if you take it before FRA, which is when the amount peaks. Survivor benefits, under both the old and new laws, are not deemed. This means you can claim your survivor benefit and defer your own retirement benefit. Or you can claim your retirement benefit first and wait until the survivor benefit reaches its peak before claiming it at FRA. A surviving spouse cannot receive an individual retirement benefit plus the late spouse’s benefit, but only an amount roughly equal to the greater of the two. The formula is complicated, which does no favors to grieving survivors trying to make claiming decisions.
All of which underscores my view that this last-minute move by Congress to shut down file-and-suspend was ill-considered. The strategy as highlighted by our book was viewed by some policymakers as an unintended consequence of the rules that unfairly benefited wealthier couples.
Well, there’s little evidence that those who used file and suspend were mainly high earners. In any case, the tax breaks for home ownership, employee health insurance, and 401(k)s overwhelmingly flow to wealthier people, but I don’t see them being outlawed anytime soon. What’s really unfair is the lack of public discussion about these rules, which blindsided nearly everyone. It’s a bad way to legislate, and it further erodes confidence in Social Security and our government at a time when our leaders should be doing their best to restore it.
Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security.” A revised edition explaining the new Social Security rules will be published May 3. His companion book, “Get What’s Yours for Medicare: Maximize Your Coverage; Minimize Your Costs,” will be published in October. Reach him at firstname.lastname@example.org or @PhilMoeller on Twitter.
Correction: A previous version of this article mistakenly said that someone who reached full retirement age on or before April 29 could still use the file-and-suspend strategy after this date. This is wrong. They must have filed before the new law takes effect.